Market Entry, Singapore, Tobacco

1. PAN PARAG
MARKET ENTRY STRATEGY – SINGAPORE
GLOBAL BUSINESS ENVIRONMENT-1
GROUP-4:
ANKIT MALHOTRA CMM021
AVINASH SINGH CMM023
KRISHNAMURTHY SRIPATHY GLSCM046
PRAJAKTA TALATHI CMM031
RICHA SINGH CMM033

2. Table of Contents
Pan Parag – Brief Overview.....................................................................................................................3
Reason for Success of Pan Parag in India................................................................................................4
Critical Success Factor for Smokeless Tobacco in Industry:....................................................................4
Tobacco Industry in Singapore................................................................................................................5
Market Data........................................................................................................................................5
Legislation...........................................................................................................................................7
Advertising and Sponsorship ..................................................................................................................8
Media..................................................................................................................................................8
Retail Point-of-Sale .............................................................................................................................8
Sponsorship of Sports/Music Events ..................................................................................................8
Distribution of tobacco branded gifts (e.g. cigarette branded lighters, pens, etc.) ...........................8
Market Entry Options in Singapore ........................................................................................................9
Exports ................................................................................................................................................9
Licensing and Franchisee ....................................................................................................................9
Strategic Alliance: ...............................................................................................................................9
Joint Venture:....................................................................................................................................10
Wholly Owned subsidiary: ................................................................................................................10
Recommendations................................................................................................................................11

3. Pan Parag – Brief Overview
Pan Parag is an Indian mouth freshener. It was launched in the year 1973 by M.M.Kothari. It is a kind
of Pan Masala whose ingredients are Betel Nuts, Cardamom, Lime, Catechu and Natural perfumes. It
keeps your mouth fresh like any mint and it is highly addictive. It was initially launched in big tin
packets. But later became a huge hit when launched in smaller pouches (sachets) which were much
cheaper and lesser in quantity compared to the first launched big tin packets. +`It is available in re1,
re 1.5, re2, re3, re5 and re10 packets. It has several products and product types depending on the
customer segmentation which are
1. 2000 Pan Masala
2. Pan Parag Strong
3. Pan Parag Supreme
4. Pan Parag Premium
5. Pan Parag Extra Plus
6. Parag 9000 (Pam Masala)
7. Pan Parag Powder with Saffron
Pan Parag is the first branded product in the category of Pan Masala. It was the only pan masala
brand that was marketed in the TV. There was a huge demand for Pan Parag and the demand kept
increasing and so they had to automate the sachet packing plant to meet the demand in 1985. In
order to meet the demand they have also started giving franchisee to various organizations. They
received FMCG award of the year for 2003 and 2004.

4. Reason for Success of Pan Parag in India
As discussed, Pan Parag is the first branded Pan Masala in the Indian market. It used to come in tins
because of which it was not able to attract the lower income market which was its target customer.
But in 1985 when it was released in small sachets, it attracted a lot of customers because of its
cheap pricing of sachets which range from 1 rupee to 10 rupees which is 2 cents of a Singapore
dollar. As most of Indians have a habit of using Pan Masala after having meal, it was used by almost
by every Pan user in India. As it began to build a brand, it was used in marriages and all the places
which had a social gathering followed by either lunch or dinner. As a result of it, its market grew
huge and Pan Parag began to grow huge in India. There was also no competitor for this product in
industry till late 1980 s and as Pan Parag was the biggest established brand in this market and it had
the best technology in production, no competitor was able to surpass Pan Parag. It is able to offer at
least 100% dividend from the year 2004 because of its profits. The Pan Masala market in India is
assumed to be of the size 3 billion Singapore dollars.
Critical Success Factor for Smokeless Tobacco in Industry:
1. Price – Smokeless tobacco is the cheapest form of tobacco
2. Youth and low class – The price and variety makes smokeless tobacco very popular
3. Substitute – To quit smoking people take resort of this as a substitute
4. Nicotine effect – Nicotine takes 10 seconds to reach brain, therefore pumps up the blood
levels and the person feels fresh and active
5. Addiction – As and how people experience the effects of Nicotine they get used to the high
blood rush and once the effect diminishes, they have more nicotine intakes. This daily intake
of nicotine turns into addiction
6. Loyalty – Customers are loyal and it is not easy for them to quit the habit due to lack of will
power, group dynamics, etc. The percentages of users who made a quit attempt in the past
year was very low in Bangladesh (29%), India (35%) and Thailand (22%)
7. Awareness – Lack of public awareness and incomplete knowledge about the harmful effects
of smokeless tobacco
8. Misinformation – Many people use it to cleanse teeth, as a breath freshener, for toothache,
to relieve gastric disturbances, to ease abdominal pain to relieve stress and even as an
antidote for morning sickness
9. Variety – Available in various flavors like chocolate, pan masala, variants of hukka, cigar, etc.
10. Group dynamics – a friend will ask or force other friend to taste or consume
11. Availability – Easily available and available in bulk volumes
12. Psychological effect – Mild stimulant and relaxation effects, making it appealing to students,
shift workers, and other people who may have trouble staying awake sometimes

5. Tobacco Industry in Singapore
Market Data
Table 1: Sales of Tobacco by Category: Volume 2007-2012
Source: (Euromonitor International, 2013)
Table 2: Sales of Tobacco by Category: Value 2007-2012
Source: (Euromonitor International, 2013)
Table 3: Sales of Tobacco by Category: % Volume Growth 2007-2012
Source: (Euromonitor International, 2013)
Table 4: Sales of Tobacco by Category: % Value Growth 2007-2012
Source: (Euromonitor International, 2013)

6. Table 5: Forecast Sales of Tobacco by Category: Volume 2007-2012
Source: (Euromonitor International, 2013)
Table 6: Forecast Sales of Tobacco by Category: Value 2007-2012
Source: (Euromonitor International, 2013)
Table 7: Forecast Sales of Tobacco by Category: % Volume Growth 2007-2012
Source: (Euromonitor International, 2013)
Table 8: Forecast Sales of Tobacco by Category: % Value Growth 2007-2012
Source: (Euromonitor International, 2013)

7. Legislation
Singapore is well known for having one of the world’s strongest tobacco control legislative
frameworks, backed by substantial government efforts towards enforcement and penalties.
Leadership of tobacco control in Singapore lies with the Ministry of Health. Singapore’s national policy
on tobacco control was introduced in 1986 and it identified public education, legislation, taxation,
collaboration between various commercial and non-commercial sectors and community participation
as key elements for its effective implementation. These elements were established in a number of
measures including the total prohibition of the advertising and promotion of tobacco products, as well
as strict regulations regarding the packaging of tobacco products. As an indication of how strict the
tobacco control legislation in Singapore is, inbound passengers receive no duty free tobacco allowance
upon landing at Singapore airport.
On 29 December 2003, Singapore signed the World Health Organization’s global tobacco control
treaty, the Framework Convention for Tobacco Control (FCTC), and ratified the treaty on 14 May 2004.
This committed the Government of Singapore to putting into effect a comprehensive set of legislative,
economic and social measures which are intended to promote and protect public health against the
adverse effects of tobacco.
Although the FCTC treaty is not legally binding, the Singaporean Government is expected to legislate
some of the policies suggested in the treaty over the forecast period. By 1 March 2013, one of the
specific laws which will come into force is the removal of misleading terms such as “mild” or “light”
from cigarette branding and packaging, as these terms may be misconstrued by smokers who may
believe them to be healthier alternatives. This may have an adverse impact on sales of mid tar
cigarettes, low tar cigarettes and ultra low tar cigarettes during the forecast period.
The launch of the Blue Ribbon initiative by Health Promotion Board (HPB) in March 2012 made
Singapore the first regional country to adopt the active tobacco control programme on a nationwide
scale. With their efforts towards creating a smoke-free environment, several markets and food centers
were awarded the Blue Ribbon with their removal of the designated smoking zones voluntarily. In a
bid to achieve a smoke-free environment, HPB will continue to collaborate with more hawker centers
and coffee shops. In addition, there are HPB ambassadors handing out Blue Ribbon and “I Quit”
brochures to promote a smoke-free lifestyle. There is also a peer-led Youth Advolution for Health
(YAH) Programme from the HPB’s Health Ambassador Network which expanded its volunteer base to
450 members. Reaching out to around 150,000 youths annually, YAH volunteers aim to encourage
them to lead healthy and smoke-free lifestyles.
Anti-smoking legislation is likely to become stricter in Singapore over the forecast period as the
government continues to penalize those who fail to obey the law, further focusing its efforts on
reducing smoking prevalence on the one hand and curbing contraband in order to maintain and
protect its revenues on the other.

8. Advertising and Sponsorship
Media
Television, Radio, Billboards, Consumer Press, Trade Press, Cinema, etc.
In Singapore there was a complete prohibition on media advertising for tobacco products since 1970.
Singapore boasts one of the most comprehensive bans on cigarette advertising in Asia. All advertising
and promotion of smoking, cigarettes and tobacco-related products is prohibited in Singapore under
the Smoking (Control of Advertisement & Sale of Tobacco) Regulations. Advertising is prohibited in all
forms, including print and broadcast media. Since the 1990s, there was also a complete ban on all
tobacco sponsorship in Singapore.
Retail Point-of-Sale
Since 1993, retailers were prohibited from selling tobacco products to those aged under 18, and it was
also required to prominently display signs at all points-of-sale regarding this restriction. Price
discounts for the bulk purchasing of tobacco products are also prohibited.
International imagery, pricing, distribution and retail visibility are the only avenues still available for
cigarette brands to compete against each other in Singapore. The complete ban on the advertising
and promotion of cigarettes and other tobacco products left manufacturers and distributors with no
other channels or avenues for the promotion of their brands over those of their rivals.
Sponsorship of Sports/Music Events
Tobacco players are not allowed to sponsor any sporting/music events following the changes in the
Anti-Smoking Bill which were announced in July 2010.
Distribution of tobacco branded gifts (e.g. cigarette branded lighters, pens, etc.)
Since 1970, there was a ban on the distribution of paraphernalia bearing cigarette brand names being
distributed as gifts.

9. Market Entry Options in Singapore
Let’s first take a look at the market entry strategies to get a strong base into Singapore. We will look
at the advantages and disadvantages for each, and then advice, which strategy is the best for Pan
Parag. We shall also look at other factors such as Average Living costs for Expatriates, average rent
for office space, Free Trade Zones, Social security system, Labour laws, and Taxation.
Exports
This is the easiest way to get into a market of Singapore or perhaps any other country. The company
directly exports to a domestic buyer who then further sells the product. This type of entry does not
really require a high level of investment and it is highly flexible. Though, exporting will come with its
limitations such as the control function will be less over the distribution and selling in Singapore, and
not having too much control over the target markets.
Licensing and Franchisee
Licensing and franchising agreements permit an obligatory party to produce and sell the foreign
firm’s product(s) in the markets agreed upon. The agreement thus allows the obligatory party to use
the foreign firm’s products, knowledge, and the brand name. In licensing and franchising
agreements, the vast majority of the necessary investment lies with the obligatory party. The small
benefits include a faster access to the Singapore market, and also access to other global markets
around Singapore that may include Malaysia, Vietnam, Indonesia, and Thailand.
Disadvantages:
a) Risk of opportunism
b) Licensee may become a future competitor
c) Revenues may not be adequate
d) Lack of control over franchisee’s operation
e) Cultural problems and physical proximity.
Strategic Alliance:
In a strategic alliance a foreign and the obligatory party firm agree to collaborate in the foreign
market in order to reach specific goals while remaining independent organizations i.e. there are no
equity investments. It is often aimed at attaining synergies through combined effort and can
additionally involve knowledge and technology transfer as well as shared expense and risk. Strategic
alliances require limited upfront investment. It gives autonomy, flexibility, and equal ownership.
Advantages:
a. Creates networks that are attractive to large customers
b. Increases market share and reduces competition
c. Opens the door to new funding opportunities
d. Improves efficiency, productivity, and financial stability

10. Disadvantages:
a. Fear that collaboration will lead to future mergers or takeover
b. Resistance to change
c. Legal liability
d. Distrust of ownership and control issues
Joint Venture:
In a joint venture, foreign firm and the obligatory party in a specific customer segment agree to
share activities. This collaboration can for instance take place through a subsidiary owned equally by
both parties. Such an agreement would in most cases involve a substantial investment from the
foreign firm although not as much as an acquisition.
Advantages:
a. Creation of synergy
b. Higher rate of return and more control over operations
c. Access to distribution network
d. sharing of risks with a venture partner
Disadvantages:
a. Lack of control
b. Poor integration and co-operation
c. Imbalance in assets or investments bought in by different partners
Wholly Owned subsidiary:
A wholly owned subsidiary can either be obtained in a foreign market by acquiring an entire firm or
part of a firm in the target market or it can be started as a green field venture; that is building
production and/or distribution facilities from scratch in the target market. Since all costs associated
with this sort of entry mode lies upon the entrant, this is naturally the one which requires the largest
upfront investment. In case of a green field investment, the entrant cannot rely on other party’s
knowledge on the foreign market. A major advantage to a wholly owned subsidiary is that the
entrant will retain full control of the venture.
Advantages:
a. Reduce the risk of losing control over core competencies
b. Full control over operations in the foreign country
c. It gives the host company a free control to make the kind of subsidiary it wants to
Disadvantages:
a. They are risky
b. Slower to establish.

11. Recommendation
1. Market data shows that total tobacco industry in Singapore has grown by 6.2% CAGR from 2007-
2012.But the in last few years the sale of tobacco has gone down .The forecast report shows 2.1%
de growth CAGR which totals to 10.2% de growth from 2012-2017.So the market figures are not
very favorable. But forecast is just estimation & past performance of tobacco is descent in
Singapore. So I will recommend the slow & incremental entry for pan Parag in Singapore market.
2. Since we are looking for an incremental entry they should first open a sales office in Singapore.
This office will first make people of Singapore to taste the product & make them familiar with it.
Once the people in Singapore become familiar with the product the company will make entry by
WHOLLY OWNED SUBSIDIARY. This can be started through GREEN FIELD VENTURE. All the cost
will be taken as expense by Pan Parag, but once set up it will have full ownership of the subsidiary.
Pan Parag will retain full control of the venture, and that is the biggest advantage over other
market entry level strategies such as Franchisee, Joint Venture, and a strategic alliance. With this
measure it will reduce the risk of losing control over its core competencies. It will also have
control over the operations and distributions in the foreign country. This will be slower in
nature, but we also need to adhere to the fact that we will grow in an incremental manner
in Singapore.
3. Now another uphill task is to spread awareness about the product in Singapore. Since the
promotion of tobacco product through Television advertising & print media is banned in Singapore
we need to use the some other mode of promotion. So to start with , following ways can be used
by sales team to promote the product:
 Free samples in bars & night clubs
 Free samples in restaurants
 Display in retails chains i.e. 7*11,NTUC,Cheers
 Word of mouth advertising
 Different colored packaging
4. Once the way of promotion has been decided the next task is to find out the specific areas to start
with the promotion. So company should target areas which have higher concentration of Bars,
Night clubs, restaurants etc. So to start the sales team must focus on areas such as Clarke Quay,
Arab Street, and little India. Business place like Business development center(raffles place,&
Marina Bay) & International business park where intake of tobacco is high
5. Now once all these promotional process were conducted for 2 month, people got the feel & taste
of the products, sales people can collect the feedback from people & track the movement of
product on different retail chains in Singapore. Taking the report in Consideration Company can
establish the further distribution channels & enter the market through WHOLLY OWNED
SUBSIDIARY.
6. Now product has developed its identity in the market the company should increase the visibility
of product by making it available at all possible site which are currently selling tobacco products.